UK: Immigrants Face Difficulties When Applying for Credit Services

July 27, 2023

As a result of the changing financial situation all across the globe, people are being forced to cross borders and establish roots in other countries or even continents.

A new report published by Nova Credit and titled ‘10 million UK immigrants – a market opportunity hiding in plain sight’, highlights the challenges immigrants are experiencing in the UK when it comes to accessing credit services – these include applying for a credit card, car finance or even renting. All of this as a result of a lack of credit information for lenders across borders.

The study looked at 1,000 working age adults who moved to the UK in the past 10 years, and it shows that due to a lack UK credit history, 66% of immigrants found the process to receive credit took longer than it should, 55% of correspondents revealed service providers treat them differently, or discriminate them due to the lack of credit history, and 59% were told by lenders and financial services that they would receive different treatment.

Only 26% have been able to get full access to credit products and services.

All of this is, as previously stated, the result of individuals moving and leaving their credit history behind when they enter the UK, and the lack of this credit history means lenders will automatically decline an immigrant’s applications for new finance, or go through a manual process which will end up in the application being declined anyhow.

The lack of visibility into previous credit history means that immigrants often wait longer or pay more to receive the essential credit products and services they require to establish their new lives in the UK, such as credit cards, car finance or phone contracts.

As immigrants enter the UK, 59% start to look for a credit card within the first three months, 65% look for a rental property within one month and 60% look to buy mobile phones within the first week.

According to Collin Galster, non-executive director of Nova Credit UK, the automatization of application and approval processes have greatly improved the experience of people of the UK seeking credit, however, this doesn’t extend to people who crossed the border into the UK to establish their lives overseas.

This isn’t the fault of lenders themselves, but a result of credit reporting systems that were built within national siloes – systems that fail to meet the needs of an increasingly globalised and integrated world.

The 2021 Census shows that 10 million people in the UK currently were born overseas, and 26% of people on Nova’s report currently earn the average UK wage (£40,000) and 45% state work is the primary reason for their move into the UK. And 80% say they will be in the UK for at least 4 years.

Over 55% of immigrants think that any further applications they make will be refused, however, 53% will still apply for credit within the next year, and 21% will require a credit to purchase a home.

The UK immigrant population is a fundamentally crucial market segment for UK financial services to serve in a better way. These are creditworthy, credit-hungry individuals who constitute a market opportunity hiding in plain sight from lenders and other credit providers continually seeking new market segments. (...) Serving underserved communities like UK newcomers doesn’t just solve for financial inclusion. It is socially responsible while creating vast business growth potential for the lenders that take the plunge.

Ushering New Change

Immigrants are the fastest growing demographic in the UK, and the UK grants 800,000 long-term visas to work or study annually.

These difficulties are having an impact on immigrants’ lives, as 39% of correspondents said they have a feeling of isolation, and face difficulties to make friends, and 37% face long commutes to get to work and school.

There is an opportunity to address how financial services treat this growing population demographic. It is important for financial services to keep up with the times and stop relying on borders, as people everywhere in the world are relocating to find a better quality of life.

Without doubt, responsible lenders are treating their customers fairly, but Consumer Duty may help spark greater innovation that make the experience consumers receive more equitable regardless of their backgrounds.

Want to learn more? Check out The Fintech Times’ full write-up  here.

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